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Miscreants Among Us

Most rogues, like SocGen's J?r?me Kerviel, don't go unnoticed—just unreported

What do you make of Jérôme Kerviel, the trader whose secret dealings just cost Société Générale $7 billion? — Jorge González Henrichsen, Mexico City

We'd guess that his dealings probably weren't so secret. In fact, we'd wager that ever since the details of Jérôme Kerviel's trickery started trickling out, more than a few of his coworkers have been cringing. "I knew something was wrong with that guy," they're confessing at home or whispering to each other. "He always gave me a strange feeling." Some are recalling the times they almost spoke to a manager about their concerns but stopped themselves. "I didn't have any real proof," they might tell you. Or: "It's always better to keep your head down." Or: "No one would have listened."

It's hard to argue with these explanations. Kerviel was adept at covering his tracks and slipped though several of the bank's security firewalls. And it's true that organizations—especially big, hierarchical ones—can develop cultures where the rank and file don't feel exactly enthusiastic about reporting bad news upward, especially if it's a hunch. They sense their managers don't want to hear it, and their managers, busy with competitive pressures, don't do a heck of a lot to persuade them otherwise.

But we don't want to jump on the blame-the-company bandwagon. Sure, companies could make it easier for employees to voice concerns. But from our experience, even when organizations provide easy, confidential ways for staffers to speak out, few do. Suggestion boxes remain empty; ombudsmen wait by silent phones. Even where managers stress that risk management is everyone's job and that those who speak up will be role models, there seems to be a disinclination to "squeal." Instead, people wait, hoping the miscreant in their midst moves on or gets caught.

And so, time and again, you get cases like Kerviel's, of rogues who raise hackles but not alarm bells. In 1994, after Kidder Peabody (a GE subsidiary of which Jack was CEO at the time) lost hundreds of millions at the hands of trader Joe Jett, several of Jett's colleagues said they'd long suspected he was playing dirty. "Someone trading such mundane products could never make those profits," they generally said. "We figured someone upstairs would catch on." And while there is no comparison between the magnitude of such incidents, this same dynamic brings to mind the tragedy at Virginia Tech, where dozens of people who knew the killer later said they feared just such an incident. Some had spoken up. Many more, hoping someone else would notice, kept quiet.

Soon after the shootings, Virginia Tech instituted numerous changes designed to make a repeat impossible. That's what happened at Kidder Peabody, and that's what will happen at SocGen. Myriad new financial controls will be put in place—all designed to prevent another case like Kerviel's.

Such a response is both understandable and necessary. But it's ironic; the likelihood of another Jérôme Kerviel is slim. Instead, someday, somewhere, a rogue will surface with an ingenious and totally new scheme. Bad guys' imaginations are always bigger than the good guys'. That's why companies must keep encouraging employees to come forward with concerns. That's why risk managers must have real authority. Too often, these individuals get less, in salary and respect, than those they police. As long as that's so, bad news won't travel high enough, fast enough.

In the end, the world suffers fewer Kerviels than it might due to two happy facts: People are generally good, and safeguards are generally effective. Big companies are the size of cities; SocGen, at 130,000 employees, is similar in size to Bridgeport, Conn., and Topeka, Kan. So it's amazing that more businesses don't harbor rogues.

Yes there will be other rogues who "surprise" the world. But if people take anything away from the Kerviel case and the others before, perhaps it could be that employees need to know there's a good option besides silent hoping. And having the people and systems in place to listen, at any time, is how companies help the brave few find their voice.

Jack and Suzy Welch await your questions. E-mail them at For their video podcast, go to

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